Zillow Eyes Home-Flipping With Americans Tired of Their Houses
(Bloomberg) -- Americans are spending more time than ever at home. Seems like a good time to sell them a new house, according to Zillow.
Zillow Group Inc. is preparing to fire up the company’s home-flipping business as robust search activity on the company’s websites shows that house-hunters are undeterred by social distancing measures or economic uncertainty.
The company, which stopped purchasing homes in March, has seen consumers embrace virtual home tours and digital transactions, giving Chief Executive Officer Rich Barton confidence to start buying homes even as Covid-19 pandemic continues to rage.
“My belief is that people are spending so much time at home they’ve discovered the shortcomings,”Barton said in an interview from a vacation house, where he’s holed up with his family. “I don’t have a home office. My kids are all over the house, using the WiFi. I’m in the bedroom. I don’t know, maybe I should have a house with an office.”
Zillow shares jumped as much as 13% to $54.58 on Friday. That followed a double-digit surge on Thursday that turned the stock positive for the year.
Zillow, best known for its home-search tools, has spent the last two years building a data-driven spin on home-flipping known as iBuying. In that business, it uses its website to make rapid offers to home-sellers; when the sellers accept, Zillow buys the home, makes some light repairs, and puts the home back on the market.
The business loses money, but has grown quickly – it generated $770 million in revenue in the first quarter, more than double what the company took in through its core advertising business.
Softbank-backed Opendoor, which pioneered the model, has resumed buying homes. Redfin Corp., another iBuyer, restarted activity this week in Austin, Denver and the Inland Empire east of Los Angeles. The company said it expects to sell the homes it bought before halting the service in March for about 2% less than it had originally assumed.
Redfin Now, as the iBuying service is known, “performed better in a downturn than some had feared,” CEO Glenn Kelman said on an earnings call Thursday.
Zillow finished the first quarter with 1,791 homes on its books, according to a shareholder letter on Thursday. But Barton said that he’s not concerned about adding inventory while there’s still potential for another round of shelter-in-place orders.
“Even if a second wave comes, we have learned, and the industry has learned -- and the customer is beginning to learn – that the transaction can be conducted safely,” he said.
©2020 Bloomberg L.P.